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Cointegration versus traditional econometric techniques in applied economics

Authors
Disciplines
  • Economics

Abstract

The paper illustrates some of the well-known problems with cointegration analysis in order to provide some perspective on the usefulness of cointegration techniques in applied economics. A number of numerical examples are employed to compare econometric estimation on the basis of both traditional autoregressive distributed lag models and currently popular cointegration techniques. The results suggest that, first, cointegration techniques need to be applied with great care and that, second, they have not made traditional econometric techniques obsolete as is often believed.

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